The
U.S. and other major economies may have entered a new era in which
the standard tools economists use to prevent prolonged economic
slumps - tools that they've been refining since the Great Depression
- could prove inadequate.

Paul
Krugman

So
contended economist Paul Krugman in a February lecture at Oberlin
titled "The Japan Syndrome: Why Can't We Lick the Business
Cycle?"

Krugman
is a rarity. A New York Times columnist and a prominent academic
economist at Princeton (and a good bet for a Nobel Prize, according
to Newsweek), he communicates enthusiastically and well with
the public. His writings - which include numerous books, columns,
and articles - are required reading for several Oberlin economics
courses.

His talk, sponsored by the Robert S. Danforth Memorial Lecture Fund
and delivered rapid-fire to a sizable audience in Finney Chapel,
mixed complicated concepts with accessible explanations.

Japan
- once the darling of the U.S. business press but now mired in a
seemingly intractable downturn - provided Krugman's cautionary tale.
Japan, he said, is caught in a conundrum in which a primary tool
for stimulating spending and investment - the lowering of interest
rates by the central bank - has failed to jump-start the economic
engine. With interest rates almost at zero and the government having
unsuccessfully deployed government spending, the other classic economy-revving
tactic, there's no clear way out.

Krugman
suggested that Japanese policymakers think twice about the strict
anti-inflationary prudence that has characterized the world's independent
central banks in recent years and convince consumers that the central
bank will allow inflation to happen. The argument that anticipated
inflation could break Japan's logjam goes like this: If people holding
cash become convinced that prices are rising, they will spend now,
before their buying power withers. Such a policy is equivalent to
creating a negative rate of return for holding money.

As
for the U.S., Krugman preaches that even if we have emerged from
the most recent economic slump (which, as of February 12, he was
unconvinced), we came perilously close to a Japan-like mire. The
U.S. should be thinking seriously about the potential need for unorthodox
measures.

"It
may be that the U.S. has reached a recovery," Krugman said,
"but it was a pretty close thing even if it turns out that's
true. Interest rates were 6.5 percent at the beginning of 2001.
The interest rate directly under the control of the Federal Reserve
fell to 1.75 percent. There's not much further before we hit zero.
So at best we dodged a bullet."

In
the 1990s, inflation virtually vanished as a major economic problem,
Krugman said. "What we hadn't realized," he went on, "was
that a world without inflation was a world that had other kinds
of problems - namely, a world in which sometimes you couldn't get
interest rates low enough, and in which it turns out the tools you
thought were adequate turned out not to be adequate for dealing
with slumps."

"I
think there are ways out," he continued, "and probably
the most important thing to say is not to be too virtuous."

Central
banks should stop anti-inflationary efforts a few points above equilibrium,
he said, adding that this seems to be the Federal Reserve's implicit
policy. "In some other places, where they're less mysterious
and more rational, that's exactly the policy."

Those unequipped to analyze Krugman's theories can find extensive
reading material at
his comprehensive web sites (http://web.mit.edu/krugman/www/ for
older work and www.wws.princeton.edu/~pkrugman/ for newer material).
He also provides a link to the Unofficial Paul Krugman Archive (www.pkarchive.org)
while quipping, "I disavow any knowledge of its contents."

In
a May 1998 Fortune article, Krugman suggested that people
still investing in the stock market were victims of "prehistoric
programming" that drove them to seek nourishment where others
had found it, regardless of logic.

"The
whole situation gives me the chills," he wrote. "It could
be that I just don't get it, that I'm a Neanderthal too thick-skulled
to understand the new era. But if you ask me, I'd say that there's
an Ice Age just over the horizon." ATS

In
recognition of "programs that deliver exemplary services and
resources to further the educational mission of the institution,"
the staff of the Oberlin College Library has received the 2002 Excellence
in Academic Libraries Award in the college library division from
the Association of College and Research Libraries (ACRL) and Blackwell's
Book Services.

"In many ways the description of the Oberlin College Library's
many and varied activities read more like those of a major university
library than that of a liberal arts college," said Larry Hardesty,
ACRL selection committee chair.

The
committee commended the library for "a tradition of leadership
excellence both on campus and in the profession" and especially
saluted Oberlin for its model programs aimed at recruiting students
into the library profession.

"Winning
the award is a testament to the dedication, professionalism, and
service-orientation of our entire staff," said Ray English,
director of libraries.

The
library received $3,000 and a citation at an award ceremony held
on campus May 1. The College will also receive special recognition
at the ACRL President's Program during the American Library Association
Annual Conference June 17 in Atlanta. Cornell University Library
and the Andrew G. Truxal Library at Anne Arundel Community College,
winners in the university and community-college categories, will
also be honored.

ACRL
is the only individual membership organization in North America
that develops programs, products, and services to meet the unique
needs of academic librarians. Blackwell's Book Services provides
the funding for the annual Excellence in Academic Libraries Award
Program. ATS